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Congress passed the CARES act shortly after the Coronavirus outbreak.  One feature of the Act allows those ‘impacted by the virus’ to withdraw up to $100,000 from a qualified plan (401k, IRA, and others), without the usually 10% penalty (for those under 59-1/2).  While it doesn’t waive the tax liability, it does allow applicable taxes to be paid over 3 years.

This is an absolute gift from the Federal Government – and one you might want to take advantage of – if you haven’t done so already.  There are three reasons to consider leveraging this opportunity:

  1. Liquidity – with your money out of ‘qualified’ status, it is no longer subject to penalty – and can be used for other financial priorities. 
  2. Safety – with a world of investing options (rather than the limited choices offered by most qualified plans), you may find more risk-appropriate options for your money, allowing you to get off the Wall Street roller-coaster. 
  3. Buyout – Uncle Sam is effectively – a silent partner in your qualified plan.  The CARES Act is a one-time opportunity ‘buy-out’ your partner in three easy payments – never to have that money exposed to unknown future tax rates again. 

Many of our clients are not only taking advantage of this rare government gift and are moving their money into tax-free and risk-free strategies, they’re also putting their ongoing savings contributions into those investments so they don’t have to count on getting lucky – or count on another government gift in the future. 

We’re living in a world of unprecedented calamity and the profound impact any number of events can have on at-risk investments has become more than many can reconcile.  There are alternatives – seek them out and sleep better at night.  ‘

If you qualify for the withdraw option and want to take advantage of it, be aware that the window closes December 31, 2020.